New York private equity firms Kelso & Co., Porticoes Investment Management, Marathon Capital Finance and Prospect Street each unveiled plans to take public business development companies (BDCs), or pools of capital that will invest in debt and equity securities of private companies, according to SEC filings.
The registrations come hot on the heels for four other private equity firms that have unveiled similar plans.
A US business development company is typically required to return the majority of current income and profits to shareholders as dividends. For this reason, other prominent BDCs, such as Allied Capital and American Capital Strategies, have historically focused on mezzanine debt and other yield-producing investments.
Kelso is joining fixed-income specialist BlackRock in creating a joint-venture investment advisory to run BlackRock Kelso Capital, which has registered to raise as much as $750 million (€625 million) from the public market.
BlackRock Kelso’s filing papers describe a strategy of “current income and capital appreciation. We plan to invest primarily in debt and equity securities of private US middle market companies.”
The vehicle promises that the investment advisory joint venture will have ‘access to’ and supported by ‘the entire BlackRock and Kelso organizations.’
New York-based Porticoes Investment Management is seeking $575 million for Porticoes Capital, which will make similar private investments. Porticoes was formed by Les Lieberman and Kenneth Kencel, two former Indosuez Capital senior executives. Indosuez Capital is a middle market merchant banking division of Banque Indosuez.
Marathon Capital Finance is an investment management company launched by Bruce Richards and Louis Hanover, two ex-Smith Barney traders. The firm has filed to raise $200 million.
Prospect Street Energy has filed to raise $207 million for loans to energy-related middle-market private companies. The New York firm is run by John Barry and Grier Eliasek, which filing papers describe as “two senior executives with significant investment advisory and business experience in the energy-related industry.” Prospect Street most recently was called Prospect Street Ventures, and focused on venture investments in technology companies in the energy, financial services, communications, and information industries. The firm is an investor in About.com and 24/7 Media, among many other companies.
On April 6, New York private investment firm Apollo Advisors raised $930 million in an IPO for Apollo Investment, which will provide growth capital to small and middle-market private companies.
Several days later, the mighty Kohlberg Kravis Roberts registered to raise $750 million for KKR BDC, a similar debt-and-equity investment company. Days later, The Blackstone Group’s mezzanine debt team registered to seek $850 million for a company called Blackridge Investment. Evercore Partners also registered to raise $460 million for Evercore Investment, which will buy debt and equity securities of privately-held middle-market companies, according to the registration statement.
All of these new BDCs will charge a 20 percent incentive fee on top of management fees.